Trends ebb and flow in the bakery

July 1, 2012
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by Charlotte Atchley

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Attitudes forged in the recession persevere today as consumers shift their consumption of bread and other baked foods from one distribution channel to the next. Supermarket aisles, in-store bakeries and food service outlets all provide opportunities where wholesale bakers can sell their goods to the public, and each one has suffered or benefitted from the American consumer’s desire to be more frugal but still indulge.

One market’s loss becomes another’s gain as declines in supermarket bread sales give way to consumers’ reliance on food service to supply sandwich bread. Food service suffers as people cut out expensive restaurant-quality desserts in favor for the value and quantity of in-store bakery offerings. Such patterns of ebb and flow offer interesting opportunities for wholesale bakers to rethink the way they do business.

Supermarket competes for sales

The supermarket bread aisle has become a challenging environment for bakers. According to SymphonyIRI Group, a Chicago, IL-based market research firm, unit sales of fresh bread declined 4.5% in the 52 weeks that ended May 13 while at the same time, dollar sales went up 0.5%. Consumer grocery shopping trends back up these numbers with people making fewer trips to the supermarket and spending less. An attitude of frugality, brought on by the recession and a persistent stagnant economy, doesn’t seem to be going away.

“Consumers are still careful with their money,” said Wade Hanson, director of research and consulting for Technomic, Inc., Chicago, IL. “When they are spending on baked goods, they are spending on things that appear to be of high quality, maybe something they haven’t seen before and something that is at a lower price point.” They are also hunting for value by turning to private label, searching for variety and innovation or seeking alternatives to traditional sliced sandwich breads.

“[Decline in volume] is because bread has just gotten boring,” said Lynn Dornblaser, director of innovation and insight, Mintel, Chicago, IL. “Mergers and acquisitions in the market and the strength of private label make for a challenging environment that is not likely to go away soon.”

According to Mintel data, private label accounted for 30% of new products in 2012. Private label is strong partially because branded companies have taken their eyes off of what made them strong in the first place. “It behooves companies with branded products to find ways to differentiate themselves — either through flavor, functionality or promotion,” she said. “It seems to me that branded products have gotten into the trap of competing with private label on price when they have the opportunity to compete and succeed in flavor and taste experience.”

Shaking things up with novel bread products can help a bakery catch a consumer’s eye in the bread aisle and land a product in the shopping cart. Such opportunities can be found in adding health benefits, developing new flavors and creating alternatives to sliced sandwich breads such as croissants, flatbreads, pitas and artisan products.

According to Ms. Dornblaser, fiber and whole-grain breads remain the stalwarts in the supermarket aisle. “This is something that is not going to be going away any time soon because fiber figures into so many health-related issues — heart health, digestive health and weight management,” she said.

Breads with added seeds, nuts and unusual ingredients may grab consumer’s attention. Sunsweet Bakery of San Diego, CA, offers its Sunsweet Plum Amazin Bread made with purple corn and purple wheat, as well as plum concentrate and diced dried plums. At this year’s International Dairy-Deli-Bakery Association expo, the company showcased its purple swirl bread and purple harvest bread. The line not only provides a fresh look to packaged bread but also offers the health benefits of being higher in antioxidants and anthocyanins, with fewer calories, more fibers and less sugar than breads made with other kinds of corn or wheat and breads made with cranberries or raisins.

Food service saves the loaf

Sandwiches dominate America’s food culture, particularly at lunch. According to Harry Balzer, chief industry analyst and vice-president of The NPD Group, Inc., Chicago, IL, the sandwich is the No. 1 end dish consumed by American consumers, and the bread category depends more and more on sandwich consumption instead of people eating single slices of bread.

At breakfast, a diversity of alternatives — breakfast sandwiches, donuts, burritos and oatmeal — is overtaking the slice of toast. At dinner, consumers see the dinner roll as extra calories and evidence of a complicated, inconvenient meal. As never before, people look for convenience and ease, not elaborate meals with multiple side dishes that take time to prepare.

Sandwiches, on the other hand, are easy and quick to assemble and can serve as convenient vehicles of healthy foods. They can stand on their own as a meal or be paired with simple side dishes. Consumers perceive that good sandwiches are made with fresh ingredients, but consumers looking to limit shopping trips and spending don’t want to make the effort associated with fresh items.

“I want fresh, but fresh is a hassle,” Mr. Balzer said, speaking for the consumer. “Fresh, by definition, means I have to do something frequently. It means I have to buy it frequently, use it frequently and schedule my life around using it before it goes stale.”

Instead of investing in fresh ingredients, consumers turn to fast food, casual dining and other food service outlets simply out of convenience. Instead of going to a supermarket and buying a whole loaf of bread — which they may not use entirely — consumers willingly pay a premium for restaurants to make sandwiches for them.

“Some of the best-scoring restaurant chains in America are those that offer cold-cut sandwiches, and that’s not lost on anyone,” Mr. Balzer said.

In a category as large, diverse and pervasive as bread, trends emerge when someone stands out from the competition — whether it’s through product differentiation, adding value or making consumers’ and customers’ lives easier. The versatility of the sandwich and the opportunity for creativity mean bakers can offer the food service industry ways to make the sandwich more exciting with new bread options.

Consumers can be adventurous with their foods, especially ones that dominate people’s lives like bread and the sandwich, Mr. Balzer noted. They are willing to explore and try new products. So, to keep consumers interested in such a large category, bakers should have a bit of fun creating new breads ordeveloping different sandwich applications for those varieties of bread that have been around longer. In the food service arena, mini-slider rolls, hoagies, flatbreads, crusty breads, herb-flavored products or other alternatives are stealing sales away from sliced bread, particularly white bread, according to Wade Hanson, director of research and consulting, Technomic, Inc.

Bakers need keep their bread offerings diverse to help their food service customers develop signature sandwiches that differentiate them from their competitors, according to Mr. Balzer.

“If you would like to make just a plain loaf of white bread, good luck,” he said. In a category driven by novelty, bakers must be prepared to stay current with the contemporary offerings of the sandwich category.

In-store’s faux indulgence

Restaurants can’t pick up all the slack for the bakery market, however. As people start to go out to eat more, they are cutting costs to make eating out more affordable. Most likely to get cut from diners’ order as they practice frugality are pricey desserts. Consumers aren’t going without dessert, though. In-store bakeries are filling in the gap.

“The economy really had an impact, in a good way, for in-store bakeries,” said Jerry Smiley, partner at Strategic Growth Partners, Inc., Chicago, IL. “People who would buy dessert at a restaurant and pay $5 will now go to the in-store bakery and pay twice that but get 10 servings.”

Unlike the bread category, baked desserts have not been affected by the trend toward health, unless one counts smaller sizes as healthy. When consumers buy dessert, they want to indulge their taste buds, and at the in-store bakery, that means indulgence at a lower price point. Mr. Smiley said he sees this as a contributing factor in the trend toward faux gourmet desserts. Like faux artisan breads — those products that may appear or are called artisan but are really not — faux gourmet desserts achieve an indulgent, gourmet-like taste without a premium price.

“If you’re doing this faux gourmet, you’re going to have to look at ways to make a quality product that is less expensive — whether that’s using less expensive ingredients or making a smaller size,” Mr. Smiley said.

Smaller sizes are also popular as households shrink. Consumers don’t want to invest in a whole cake if there is a chance that half of it may go to waste. This frugality and aversion to waste provide an opportunity for bakers to re-create favorite baked goods in smaller sizes or value packs. The cupcake trend, which is still going strong, provides the in-store bakery with a chance to attract smaller-sized households. According to Mr. Smiley, most cupcake business happens at smaller retail shops, but there is a real opportunity for the in-store bakery to sell near-gourmet quality cupcakes in a prepackaged multipack for a better value than the retail bakeries.

“If, in fact, the cupcakes are really good cupcakes, they could compete with the cupcakes at the retail bakery,” he said.

As business conditions at traditional outlets for sliced bread and indulgent desserts become more challenging, bakers can find opportunities in other channels of distribution. Declining volume sales in supermarket aisles can be supplemented with openings in food service for more sandwich bread. Innovative flavors and forms as well as health still drive the bread category, while consumers look for smaller sizes of favorite indulgent desserts. Declining dessert sales at restaurants can push bakers to develop indulgent desserts at the right price in the in-store bakery. Demand in the various channels for baked foods does ebb and flow, but bakers prepared to adapt will benefit as the currents change in distribution patterns.

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